Time plays a crucial role in our financial decisions. While for some we would hold the money for the longest time possible, some goals are to be achieved within a shorter timeframe and thus we have to strategize on how to get the best returns within the given time. Here are a few ways on how you can differentiate between your goals and how you can save money for them.
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Short-term goals are the financial targets that can be achieved relatively faster. These are more immediate expenses of a person which requires spending money within a few months or a year.
One of the best ways to fulfil short-term goals are accumulating money in an RD account or letting a lump sum amount grow in your savings account. You can auto-debit your salary account and deposit a specific sum of money each month in an RD account to achieve your goals relatively faster.
Invest in Short term debt funds:
You may invest in liquid funds or short-term debt funds to get a better interest rate while maintaining its liquidity. If you do not have a fixed tenure in mind and want to fulfil your goal in the coming 2-3 months then liquid funds are the right choice for you.
Limit your expenses:
While looking to save money for your short-term goals, you must also plan to curb your expenses and keep track of your spending habits. Limiting expenses will help you prioritize your goals and save some extra amount that can be used to create an emergency fund.
Medium-term goals are the ones whose tenure lies between short-term goals and long-term goals. To fulfil the mid-term goals you need to save for 5 years or more. Most of the medium-term goals includes saving for home down payment, saving for children’s education or saving money to start a business. Some investments tools to help you achieve such goals are:
If you want to save for your child’s education then make sure to choose the correct investment product. If the expenditure is within a few years then equity products like ELSS or purchasing direct stocks from companies are an ideal way to generate a corpus. If you are a risk-averse investor then debt funds can be your option too.
Start a business:
Many people aspire to start a business of their own or start a side hustle for additional income. However, conventional FDs or putting money in a savings account won’t help you much. If your savings target is a little higher, a little risk will help you fetch better returns. For example, investing in large-cap funds or equity-oriented hybrid funds will give you good returns in the medium tenure as well. MIPs or medium-term debt mutual funds can also be a good investment option for your medium-term investment.
While planning for your medium-term investments make sure to check the tax implication of the investment options. A lower tax liability gives you an additional yield. For mutual funds and equity-related products make sure to understand the account costs, additional charges or fees involved.
Long-term financial goals are the ones where people wish to remain dedicated towards an investment for a long tenure. In short, these are your distant goals that involve spending huge sum of money and requires saving for almost the course of your career. Most important long-term goals are retirement planning, children education or marriage, financially independent life etc.
Assess Retirement corpus:
While talking about long-term financial goals, the most important one is planning for retirement. Long-term financial goals such as these require you to save persistently throughout your service tenure. Most of the government and private sector employees can save for retirement through EPF. For creating additional corpus PPF and NPS are the best options that give good interest income, tax benefits as well as compounding of interest. Other efficient investments options include mutual fund SIP, Index funds, and diversified equity investment.
Children’s higher education and marriage:
Realising your child’s education needs and choosing the best investment instruments calls for a growth-oriented investment strategy. While setting your investment strategy you must be realistic, consider the impact of inflation. Determine exactly how much you want to save and choose your investment tool accordingly. Some government scheme like PPF or Sukanya Samriddhi can give you good retunes and are long-term investment tools for risk-averse investors. Other equity-linked investments like ELSS can help you create a considerable sum if you are willing to take a little risk.
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